Does the Bhc confidentiality agreement require the franchisee to obtain written consent from the Franchisor before engaging in a Competitive Business after the Franchise Agreement terminates?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) For a period of two years after the date ("Termination Date") this Agreement is terminated, is canceled, or expires without renewal pursuant to section 5.2 of this Agreement, Franchisee agrees that neither Franchisee nor any Principal Equity Operator will (either directly or indirectly, for itself or themselves, or through, on behalf of, or in conjunction with, any person, persons, partnership, corporation or other entity) operate, manage, own, assist or hold an interest in (direct or indirect as an employee, officer, director, shareowner, partner or otherwise), or engage in, any competing business selling goods or offering services equivalent to BHC Products or the Franchised Business, within a radius of 25 miles of Franchisee's Territory or any other authorized retail location selling BHC Products, without Franchisor's express prior written consent, which consent may be withheld in Franchisor's sole and absolute discretion. Following termination or expiration of this Agreement, Franchisee must always refrain from any use, direct or indirect, of any Proprietary Information or Trade Secrets.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, franchisees are restricted from engaging in any competitive business after the termination of the Franchise Agreement without the franchisor's written consent. Specifically, for a period of two years post-termination, franchisees and their immediate family members must obtain written consent from Bhc before engaging in any Competitive Business. This restriction applies to businesses located or operating within a 25-mile radius of the franchisee's former location or within a 10-mile radius of any other franchised or company-owned Bhc restaurant.
This non-compete obligation is designed to protect Bhc's confidential information, trade secrets, and market presence. The franchisor's consent can be withheld at their discretion, meaning a franchisee might be prevented from opening a similar business nearby, even after their franchise agreement ends. This clause aims to prevent franchisees from using the knowledge and experience gained during their franchise term to directly compete with Bhc.
However, this restriction does not apply if the franchisee obtains a separate agreement with Bhc that grants them the right to compete. Furthermore, if any applicable law or regulation limits Bhc's rights under the non-compete clause, the clause will be amended to conform to those legal requirements. This ensures that the non-compete is enforceable and compliant with local laws.
A prospective franchisee should carefully consider the implications of this non-compete agreement. It is important to understand the geographic scope and duration of the restriction, as well as the conditions under which Bhc might grant consent to compete. Franchisees should also be aware of the potential legal limitations on the enforceability of non-compete agreements in their specific jurisdiction.